Now We Know How Argentina Wants To Resolve Its Battle With Hedge Funds

It seems Argentina is carving out a middle-of-the-road solution
in its vicious battle with hedge fund billionaire Paul
Singer.

Until now, the discussion has always centered around two options:
Argentina can pay and violate its own understanding of national
sovereignty, or it can not pay and potentially end up in default.

Singer has been just has intransigent. He and his fellow
plaintiffs have doggedly pursued the $1.3 billion in sovereign
bonds the country owes them since their issue in 2001. Argentina
has refused to pay them, saying that these "vulture" funds had
the opportunity to restructure in 2005 and 2010 and did not.

So forget them.

Yesterday Argentina won a substantial victory. After New York
Judge Thomas Griesa ordered the country to pay both Singer and
bond holders that restructured (exchange bond holders) by
December 15th in a lump $3 billion payment, the country and the
exchange bond holders appealed to the 2nd Circuit Court.

To the surprise of many observers, they won.

But the Appeals Court's argument for why they would allow the
proceedings to continue had little to do with Argentina. Rather,
it had to do with the argument exchange bond holders made.

In brief: The exchange bond holders said it was unfair that
Singer be awarded 100 cents on the dollar for his investment when
they were forced to take 30.

And in truth, many believe this has major implications for the
sovereign bond market
(think: Greece). After all, why should any creditor accept a
restructuring deal at all if another bond holder can hold out and
get all their money?

All of that considered, the new resolution strategy coming out of
Argentina right now makes perfect sense.

According to
Clarin (a newspaper that has its own
problems with the government), the country's Finance Minister
Hernán Lorenzino has said Argentina is open to restructuring
Singer's debt according to the 2010 deal exchange bond holders
took.

That solution, said Lorenzino, would "fall in line with our
country's norms and could be debated in our Congress."

That probably won't suit Paul Singer, though. Sources close to
him told
Fortune that in his quest to hunt down debt he likes to "go
after the bad actors" that can afford to pay but won't. In 1996
he told a Court that Peru (another one of his targets) would
"...either pay us in full ... or be sued."

Singer eventually one $58 million in that case.

Argentina, however, is obviously not as scared of a little legal
trouble.